Allyson Colby offers an update on the glass in a prominent Manchester tower.
Key point
- Failure to make a case that could have been made at trial weighed heavily against a litigant seeking to vary an order for specific performance of a repairing covenant.
Lord Justice Lewison once famously remarked that a trial is not a dress rehearsal. It is the first and last night of the show. And so it proved in Blue Manchester Ltd v North West Ground Rents Ltd [2019] EWHC 142 (TCC); [2019] PLSCS 30 (see www.egi.co.uk/legal/a-stitch-plate-in-time-fell-short).
The question that arose was whether an iconic 47-storey glass tower was in disrepair. Just eight years after the building was completed, the structural sealant holding the glass in position was failing and the building contractor, Carillion Construction Ltd, had had to install temporary stitch plates to keep the glass in place.
Unfortunately, Carillion went into liquidation before a permanent solution could be found. But the temporary fix appeared to be holding. Nonetheless, BML, the operator of the Hilton Hotel, which occupied the first 23 levels of the tower, was dissatisfied. The stitch plates had a detrimental impact on the visual appearance of the building and BML was concerned about their safety and longevity.
So it sought an order for specific performance of the repairing covenants in its 999-year lease – which obliged the freeholder, NWGRL, to keep the façades in good and substantial repair and, when necessary, to replace and renew them – and won. The court ordered NWGRL to effect permanent repairs to the tower and to restore its visual appearance.
Financial hole
This left NWGRL in an unenviable position. It had purchased the building from the original developer as a ground rent investment, yielding a modest rental income. And, although the tenants were liable for service charges, it was not entitled to recover the cost of remedying inherent or design and construction defects from BML.
However, the trial judge had indicated that NWGRL could apply for permission to implement a different scheme if it could show that the remedial scheme that he had approved was not reasonably practicable, except at a cost that was disproportionate. So NWGRL sought to do just that. Having obtained the support of the owners and occupiers of the flats situated in the upper part of the building, NWGRL applied for and obtained planning permission to implement an alternative scheme. It then served notice of its intention to undertake that scheme on the leaseholders, in accordance with section 20 of the Landlord and Tenant Act 1985, invited them to comment and, in Blue Manchester Ltd v North West Ground Rents Ltd [2020] EWHC 2777 (TCC), asked the court for permission to proceed with the alternative scheme.
Considerations
NWGRL explained that it would need assistance from its parent company, GRIF, to finance the remedial work. GRIF was willing to help on two conditions. It required NWGRL to recover funds from Carillion’s insurers and from Carillion’s subcontractors pursuant to their collateral warranties, and to obtain the court’s approval for its alternative scheme.
The alternative scheme envisaged the use of pressure plates to provide additional protection against the possibility that the glass units might fail. NWGRL explained that this work could be undertaken more quickly and cheaply than the remedial scheme approved by the court. It presented fewer health and safety risks – and would reduce the cost to the residential leaseholders.
Unfortunately, however, the owners and occupiers of the flats were not party to the proceedings. So the court was unable to consider the financial impact on them – even though they would have to bear 51% of the cost of the remedial work. But the judge did suggest that it might be possible to argue that their service charge contributions should be limited to the cost of the cheaper scheme.
NWGRL’s financial position was also irrelevant to the question of whether the scheme should be varied, although it might be a very material consideration in the real world. BML’s preference – which was “to have two birds in the bush”, as opposed to “one in the hand” (or “given the evidence as to GRIF’s position, one bird not quite in the hand”) – might, ultimately, prove a poor choice. That, however, was a matter for BML.
Outcome
The judge was satisfied that the remedial scheme that he had already approved remained reasonably practicable and that the challenges that it presented could be addressed. NWGRL had found a competent contractor and its tender, in the sum of £6m, plus VAT and professional fees, had not been shown to suffer from any major flaws, although there was a substantial risk that the work had been significantly underpriced. Nor was the cost obviously disproportionate in the context of the £60m premium paid for the hotel lease.
The alternative scheme was likely to cost between £2.4m and £2.8m, “with a modest risk of a modest increase” in cost. But there had been a delay in providing supporting technical information, which meant that there was a residual risk that some problem could emerge which could not easily be addressed. And, although it would improve its appearance, the building would be significantly less visually impressive.
BML considered the increased time and disruption involved in implementing the original scheme a price worth paying for the restoration of the appearance of the tower, and the importance that it attached to this was neither idiosyncratic, nor perverse. In addition, the alternative scheme could have been suggested during the original proceedings. And, although this was not fatal, it certainly counted against NWGRL’s application – which was refused. But the judge did grant NWGRL a further two years in which to implement the original scheme.
Allyson Colby property law consultant
